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Old 24th June 2015, 18:18   #1
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Default Nissan - Ashok Leyland JV: The End?

According to a recent report in ET, Nissan-AL JV could be nearing its predictable end quite soon. String of financial losses and poor market response has led to some friction between partners.

Report discusses financial complexities/figures and internal discussions in detail. I didn't fully understood the economics but I thought i'll share few take-aways from the article.

First of all, the JV, which was announced in FY 2010-11 exists in form of three different companies:
  • Ashok Leyland Nissan Vehicles Ltd., in which Leyland has a majority 51% stake.
  • Nissan Ashok Leyland Powertrain Ltd., in which Nissan has a majority 51% stake.
  • Nissan Ashok Leyland Technologies Pvt. Ltd., a 50:50 partnership.

Figures of failure:
  • AL Nissan Vehicles' loss for FY15 was 791 Cr against Rs 175 crore in FY14 (4.5 times!).

  • According to sources, friction triggered after Nissan "forced" AL to take the write-off (financial loss on book?) for the JV alone. This brought the net worth of JV to a negative of 313 Cr.

  • Total workforce at 3 JV companies has been reduced by 60-70% in the last year to about 100-120 people.

  • Failure of Stile/Evalia is a major contributing factor. Read more here (Ashok Leyland Stile axed as company plans to stick to CVs).
    Quote:
    In May, Ashok Leyland announced the stoppage of production of the multi-purpose, 7-seater vehicle (MPV) Stile a few months after it had already stopped rolling out Evalia, another MPV. While Nissan sold about 2700 units of Evalia during that period, Stile -- which was introduced a year or so later -- could only muster sales of 1190 units in the last two years.
    ( Does this mean Evalia has no longer been in production since February/March ?? )

So, as a result, investments have been deferred and all ongoing projects shelved except for an 1.5 tonner Dost, expected this year. Current variants of Dost, Partner and Mitr will continue to sell atleast as long as JV survives. Although, sales of Partner and Mitr are not encouraging either.

According to officials, AL and Nissan are giving each other an year before taking a final decision on calling it off.

Off Topic:
Quote:
Carlos Ghosn's tryst with Indian partners have always been rocky. First the high profile alliance between Mahindra and Renault for mid-size sedan Logan came undone. Subsequently, efforts to make an ultra low cost car with Bajaj also did not bear fruit and that led to a quiet exit.
Source: Economic Times
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Old 26th June 2015, 12:54   #2
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Default Ashok Leyland-Nissan JV hits rough weather

An air of uncertainty hangs over the Ashok Leyland-Nissan joint venture's future. The alliance has been hit with losses and their cross badged products i.e. the Nissan Evalia and Ashok Leyland Stile have been taken out of production, owing to weak demand ever since they were launched.

Sources say that most of the business targets have not been achieved and mounting losses, write-offs have soured the relationship between the two partners. The JV is divided into three companies. In Ashok Leyland Nissan Vehicles Ltd, Leyland is the majority stake holder with a 51% holding with Nissan as a junior partner with 49%. Nissan has a 51% stake in Nissan Ashok Leyland Powertrain Pvt. Ltd, with the remaining share held by Ashok Leyland. Both companies have an equal share in Nissan Ashok Leyland Technologies Pvt. Ltd.

Ashok Leyland Nissan Vehicles Ltd reported higher losses for the year ending 2014-15. Losses post taxation jumped from Rs. 175 crore in the previous fiscal to Rs. 791 crore. The JV invested over Rs. 1,000 crore for its vehicle platforms, with the majority of the capital being directed towards the Stile and Evalia.

Both models saw tanking sales, with neither finding acceptance in the private or taxi market. Nissan sold around 2,412 units of the Evalia since its introduction in 2012. The Stile fared even worse, with Ashok Leyland moving all of 1,154 units since it was introduced in October 2013.

The JV will now be counting on models like the MiTR, Dost and Partner.

Source: ET Auto

Nissan - Ashok Leyland JV: The End?-ashokleylandstile02.jpg

Nissan - Ashok Leyland JV: The End?-nissanevalia01.jpg

Related Discussions:

Ashok Leyland Stile (Ashok Leyland Stile axed as company plans to stick to CVs)

Nissan Evalia (Nissan halts Evalia production due to poor sales)

Last edited by Tushar : 26th June 2015 at 12:57.
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Old 26th June 2015, 14:50   #3
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Default Re: Ashok Leyland-Nissan JV hits rough weather

I am wondering what will happen to the cars already on road, which may require service / spares for coming 7 - 8 years in case the JV falls apart.

I have faced similar issues with availability of spares for Ford Escort (introduced as part of Mahindra Ford), though Ford took responsibility but spares were extremely costly and required a lot of time as mostly dealers had no inventory for spares of Escort

Too bad planning by both companies and even no attempt to introduce new and acceptable products under JV.
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Old 17th November 2015, 10:34   #4
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Default Re: Nissan - Ashok Leyland JV: The End?

Nissan-Leyland Technologies has claimed "Sick" and is seeking help from the Board for Industrial & Financial Reconstruction (BIFR). The board will take up the case for hearing on February 22, 2016.

Source:New Indian Express Bangalore edition, 17 Nov 2015

Article & Link : "'Sick' Nissan-Leyland Tech Seeks BIFR Succour"

Last edited by NPV : 17th November 2015 at 10:37.
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Old 15th December 2015, 13:23   #5
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Default Re: Nissan - Ashok Leyland JV: The End?

The Ashok Leyland-Nissan JV has received another setback. It has been sent a tax demand for Rs. 202 crore by the directorate of customs and intelligence. The factory machines, which were imported by the Renault-Nissan for the JV could also be seized. This is because the alliance had imported tools, robots and jigs under the Export Promotion Capital Goods scheme, which gives tax incentives for exports and the JV did not manage to ship any vehicle out of the country.

Link to Team-BHP News Article
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Old 15th December 2015, 18:33   #6
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Default Re: Nissan - Ashok Leyland JV: The End?

The audit for this was happening for quite sometime and heavy fines were imposed on many manufacturers in Chennai. They were not able to show which tool they imported aganist the paper it had. Lot of tax evasion and it was good that Govt. did all the job
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Old 15th February 2016, 11:26   #7
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Default Re: Nissan - Ashok Leyland JV: The End?

Ashok Leyland has taken joint venture partner Nissan to court over an automotive assets dispute. The Indian company wants Nissan to stop using Ashok Leyland's automotive manufacturing equipment installed at the Renault-Nissan facility in Oragadam, Chennai. The equipment is meant for the production of light commercial vehicles, but is reportedly being used for manufacturing cars.

Link to Team-BHP news article
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Old 15th February 2016, 11:57   #8
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Default Re: Nissan - Ashok Leyland JV: The End?

What about the DOST and it's future? I always thought it was a good product for it's segment. It sold reasonably too.
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Old 7th September 2016, 20:18   #9
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Default Re: Nissan - Ashok Leyland JV: The End?

Nissan to sell stake in JVs to Ashok Leyland

Under the agreement signed on September 7, 2016 by senior executives of Nissan and Ashok Leyland, these joint ventures will become wholly-owned Ashok Leyland subsidiaries, upon receipt of all necessary approvals from the regulatory authorities in India.

Source
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Old 9th September 2016, 21:09   #10
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Default Re: Nissan - Ashok Leyland JV: The End?

That's a very good news especially in a way that Dost is doing still good even after 5 years of launch.
From now on Ashokleyland may integrate its resources for the product development and sales. May be in another couple of years Ashokleyland will have multiple products in the SCV/LCV segments and will be a dominent player in CV space.
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Old 12th September 2016, 22:08   #11
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Default Re: Nissan - Ashok Leyland JV: The End?

Nissan-Ashok Leyland: Divorce by mutual consent

Ashok Leyland and Nissan have mutually decided to part ways in the Light Commercial Vehicle (LCV) segment. The automakers have thus announced a restructuring agreement, under which, Ashok Leyland will buy the existing stakes of Nissan in three Joint Ventures (JVs), which were established in 2008. As a result, the three JVs will now become wholly owned subsidiaries of Ashok Leyland Ltd. Financial details of the transaction haven’t been revealed.

The three Joint Ventures operate in three different domains: vehicle manufacturing (Ashok Leyland Nissan Vehicles), powertrain manufacturing (Nissan Ashok Leyland Powertrain) and technology development (Nissan Ashok Leyland Technologies). The first two companies had Ashok Leyland holding 51% of the stakes, while the remaining was owned by Nissan. The third firm had equal ownership by the two partners. Ashok Leyland and Nissan had invested over 1,000 crores in the aforementioned JVs.

As part of the new restructuring agreement signed on September 7, 2016, Ashok Leyland will continue to build and sell the Dost and Partner. Both these LCVs are based on Nissan's design, engineering and technology. Moreover, service and spare parts availability to the customers will be taken care of by a technical support arrangement. The said agreement also carries forward the old deal that supplies made-in-India parts to Nissan Motor Co. Ltd.

The Nissan-Ashok Leyland ties hit a rough phase earlier this year, when the Japanese automaker served a termination notice to then Chennai based manufacturer. Later, Ashok Leyland too sued Nissan, alleging a breach of the partnership agreement. Models manufactured under the JVs didn’t do well in the market either. Nissan had to discontinue the Evalia, and Ashok Leyland shelved the Stile after poor demand for the two products. Currently, only the Dost LCV is doing well in the market.

Nissan - Ashok Leyland JV: The End?-download.png

Link to Team-BHP News
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